UK Pension Transfers

The UK pension transfer market has come a long way since the origins of the Self Invested Personal Pension (SIPP) back in 1999 and then its international equivalent, the Qualifying Recognised Overseas Pension Scheme (QROPS), which arrived in 2006.

We have had the introduction of the ORIGO SIPP transfer platform in 2013 (which made transfers between UK pension providers quicker), pension freedoms being allowed from 2015, the 25% overseas transfer charge arriving in 2017, the abolition of the Lifetime Allowance from 6 April 2024 and, for transfers requested on or after 30 October 2024, the end of the exemption for transfers within the European Economic Area. However, the original ideals of being able to move and take control of your UK pension capital have never changed.

We now live in a modern era where people routinely change jobs (on average every 5-7 years in the UK) and perhaps also travel the world for work. This has taken us to a place far removed from even one generation before, where our parents may well have expected to work for one company and build one pension pot throughout their entire working life. People are now much more likely to build many different pensions throughout their careers, in the UK and in many cases also abroad. Holding such an array of different pensions, having little or no transparency on costs, where the money is invested or how the pension capital is growing can bring about frustration for the owner of such pensions.

SIPPS (and later QROPS) were introduced to allow a pension holder the ability to transfer multiple pensions into one transparent, on-line, low-cost structure, take control of how their pension capital is invested and ultimately decide when and how much money to withdraw during their retirement.

Important: the value of pension investments can fall as well as rise, and you may get back less than you invested. Transferring a pension is not suitable for everyone and you may lose valuable benefits, particularly from a defined benefit (final salary) scheme. Pension transfer advice for UK residents is regulated by the Financial Conduct Authority and is provided through MWC Group UK, the UK establishment of Manentia Wealth Consulting Group AG (FCA FRN 973440). Tax treatment depends on your individual circumstances and may change in the future.

For many people, a UK-based SIPP can be a suitable way to bring pensions together, including for those working internationally. SIPP’s provide a low-cost and transparent means to consolidate and manage all of your UK pension capital in one place.

They are tax efficient and allow for a wide range of investment opportunities. Furthermore, all of the SIPP solutions that we recommend also have on-line access, allowing you to be in complete control of your pension at all times.

As SIPPs are based in the UK they are not subject to the 25% overseas tax charge, which was introduced by HMRC in 2017. Please download the SIPP and QROPS guide for more information on this.

There also exists a variant of SIPPs designed specifically for the international market – called the International SIPP. Whilst still being UK based these SIPPs offer further features that may be of benefit to those living and working overseas – including the ability to hold, invest and drawdown in foreign currencies and also allowing for tax efficiency when withdrawing funds.

Pension freedoms were introduced in the UK in 2015. This allows the pension holder, from the normal minimum pension age (currently 55, rising to 57 from 6 April 2028), complete flexibility to draw down from their pension as and when they see fit, either by taking regular income or ad hoc lump sums. Depending on your residency, you may also be able to take up to 25% of your pension tax free, subject to the Lump Sum Allowance (normally £268,275).

Because a SIPP is a UK scheme, your pension capital remains in the UK.

A QROPS may be explained as the offshore equivalent of a UK SIPP. A QROPS is any pension scheme that is regulated and registered in a country outside of the UK, but recognised by HMRC to have the same underlying rules and principles as a SIPP.

Like a SIPP, a QROPS allows the pension holder control and choice over currency, investment decisions and when and how to draw down income and/or ad hoc lump sums in retirement.

Two main factors must be considered ahead of transferring a UK pension to a QROPS;

(1) Cost – a QROPS structure is normally significantly more expensive than a SIPP
(2) The 25% overseas tax charge. This charge is made against any overseas transfer unless (a) the member and scheme reside in the same country or (b) the QROPS is a scheme in which the member’s employer participates, a public service scheme or a scheme set up by an international organisation, such as the United Nations. The former exemption for transfers where the member and scheme are both within the European Economic Area (EEA) ended for transfers requested on or after 30 October 2024.

In some circumstances, a transfer to a QROPS may be appropriate. Since 6 April 2024 the Lifetime Allowance (LTA) has been abolished. Transfers to a QROPS are now tested against the Overseas Transfer Allowance (normally £1,073,100), and any amount above it is subject to a 25% charge.

For all of the features and benefits of a QROPS please download our SIPP & QROPS Guide or contact an adviser to discuss whether a SIPP or QROPS transfer would be suitable for you.

Will you outlive your savings?

Not only will todays worker normally have many more jobs than their parents before them, but they will also likely have many more years to enjoy in their retirement.

Previously a person may have been able to rely upon their company and government pension to provide for them throughout their retirement. However, with people’s retirement lasting for longer than ever before we now see a general pattern unfolding. Certain company’s pension schemes are now closed or closing (most notable, final salary schemes) and governments are routinely trying to move the retirement age backwards. There simply isn’t the funding available to pay for retirees who may routinely live beyond 100 in the years ahead.

This means that now, more than ever, it is vitally important to calculate what we’ll need in later life and ensure provisions will be in place for a potentially long and happy retirement.

Rather than simply hope and pray that our retirement will be a happy one, we can then plan to supplement any pensions we may have with additional income from savings, investments and property.

Regulated

The SIPPs we recommend are registered with HMRC and run by UK providers regulated by the FCA. QROPS are pension schemes outside the UK that meet HMRC’s conditions; the level of regulation and investor protection depends on the country where the scheme is based.

Secure

SIPP and QROPS structures are generally set up under irrevocable trust. This means that your pension capital does not normally form part of the pension or trust company’s balance sheet and is held separately from the provider’s own assets.

Cost Efficient

We work hard to ensure that all of our partner companies provide good value in terms of service and cost. This may mean that we do not always recommend the cheapest option, but the one most suitable for you.

Transparent

We always ensure that you are aware and happy with all of the costs resulting from a SIPP or QROPS transfer. This may include any set-up charges, on-going management fees and also underlying investment costs.